Two men in Belgium have been arrested for allegedly conducting digital currency exchange transactions without proper licensing. According to a report published by the Standard, a leading Flemish newspaper based in Brussels, the two men were targeted by an undercover operation carried out by Belgian federal agents.
The report by the Standard indicates that the two men are brothers, and one of them happens to be a police officer residing in Hasselt, the largest metropolitan area in the province of Limburg. The law enforcement operation involved surveillance of various Dark Web sites where digital currencies such as Bitcoin are transacted.
The brothers had opened an account on LocalBitcoins.com; according to police records, they brokered exchange transactions under the name Zhao Dong 1982, and their clients were mostly based in Belgium, China, the Kingdom of the Netherlands, and Germany. The two men mostly communicated through the mobile messaging application Telegram, which is known for its strict encryption features. For the purpose of catching up with the brothers, who are in their early 30s, Belgian agents posed as Bitcoin brokers and set up an account on LocalBitcoins.com; as they gained the trust of the suspects, the agents started using Telegram as well.
When the agents arrived at the brothers’ residence in Hasselt, they searched the garage and discovered more than 100,000 euros hidden in a spare tire. Along with the bitcoins in the online accounts operated by the suspects, the total amount seized was nearly half a million dollars.
Bitcoin and the Dark Web
The aforementioned news story from Belgium is connected to an increase in undercover operations and surveillance of the Dark Web, which is the name given to networks that are not normally accessed by the public. The Dark Web is estimated to be three times larger than the visible web, and it operates under various protocols, the simplest being secure socket layer with password authentication.
It is difficult to estimate the breadth of virtual currency exchange transactions taking place in the Dark Web; however, analysts estimate that Bitcoin and other virtual currencies are transacted on a much higher scale in hidden networks. Dark Web marketplaces such as the defunct Silk Road, which operated as a hidden service on the TOR network, prefer to deal in Bitcoin due to the prospect of plausible deniability. Although the Bitcoin blockchain is a public ledger of all transactions, individuals can use various exchanges to conceal their identities and the nature of the transaction; this is a practice known as “mixing.”
The Legal Status of Bitcoin in Belgium
It is important to note that the suspects in this case have been charged with conducting large currency exchange operations without a license. In Belgium and across the member nations of the European Union, bitcoins and other digital currencies are accepted as forms of payment even though they are not regulated.
In the past, Belgian regulators have approved the use of electronic money as a regulated currency, but this should not be confused with Bitcoin. E-Money refers to the electronic storage format of centralized and regulated currencies held in online accounts; in other words, one description for E-Money can be that of euros stored in a Visa Electron debit card that is set up via a bank’s website.
Following the arrest of the two brothers in Hasselt, Bitcoin operators in Belgium are being careful about their online transactions, even if they are being conducted under anonymous Dark Web accounts. European law enforcement agents and investigators are very active in the Dark Web because they seek to monitor marketplaces similar to Silk Road, which was mainly used to buy and sell controlled substances.